Hello All,
I have just started my first controllership with a small company. Previously, my experience has always been in mid to large size companies and I do not have a wealth of experience in tax or public accounting type issues.
This company is a LLC. Looking at the 2024 yearly P&L there is a line item for income tax expense. I always thought LLC's were flow through type entities and that there were no corporate income taxes. I asked the CFO here and she has stated that it is due to a book and tax difference of assets. This explanation to me is vague and the way I interpret her response is that the company at some point took accelerated depreciation for tax purposes on some assets and did straight line or something on the books which leads to a difference that needs to be reconciled. The way it would be reconciled is through some type of deferred tax liability and the income tax is the plug? This confuses me even more because in my mind I still think there should not be income tax expense on the books for this company. I could be completely wrong about this. Any help would be greatly appreciated. I am sure this is a common issue that I would or should know if I had a better public background.
I have just started my first controllership with a small company. Previously, my experience has always been in mid to large size companies and I do not have a wealth of experience in tax or public accounting type issues.
This company is a LLC. Looking at the 2024 yearly P&L there is a line item for income tax expense. I always thought LLC's were flow through type entities and that there were no corporate income taxes. I asked the CFO here and she has stated that it is due to a book and tax difference of assets. This explanation to me is vague and the way I interpret her response is that the company at some point took accelerated depreciation for tax purposes on some assets and did straight line or something on the books which leads to a difference that needs to be reconciled. The way it would be reconciled is through some type of deferred tax liability and the income tax is the plug? This confuses me even more because in my mind I still think there should not be income tax expense on the books for this company. I could be completely wrong about this. Any help would be greatly appreciated. I am sure this is a common issue that I would or should know if I had a better public background.